# TDS on Benefits / Perquisites - Section 194R

## Who Must Deduct?

Any person (other than individual/HUF whose total sales/gross receipts in immediately preceding PY do not exceed:

₹1 crore (business)
₹50 lakh (profession))

who provides any benefit or perquisite to a resident arising from such resident's business or profession.

## Threshold

No TDS if total value of such benefits/perquisites to that recipient is ₹20,000 or less in a financial year.

## Rate

10% of the value of the benefit/perquisite.

## Special Rule for Benefits in Kind

When the benefit/perquisite is wholly or partly in kind (and cash is insufficient to meet TDS):

The provider must ensure that tax has been paid before releasing the benefit.
Practically, the recipient pays the tax (treated as advance tax) and provides proof to the provider.

## Examples of Covered Benefits

Free foreign trip given by dealer to distributor
Gold coins, gift vouchers, luxury cars given as incentives
Free product samples retained (not returned)
Sponsored conference/event participation

Worked example

### Example 1

Example: XYZ Ltd. gives Mr. A (its dealer) a luxury car worth ₹15 lakh as a sales incentive.

Solution:

Benefit arises from Mr. A's business with XYZ Ltd.
Value exceeds ₹20,000.
Section 194R applies @10%.
TDS = ₹15,00,000 × 10% = ₹1,50,000
Since benefit is in kind, XYZ Ltd. must ensure Mr. A has paid this ₹1,50,000 as tax BEFORE handing over the car.

⚠️ Common exam mistakes

Treating 194R as inapplicable just because the benefit is in kind — provider must still ensure tax is paid.
Applying 194R to benefits provided to employees — those go under section 17(2) salary perquisites (section 192), not 194R.
Missing the small business/profession exemption (individual/HUF below the turnover thresholds need not deduct).

Bare-Act text 194R · Income-tax Act, 1961 · click to expand

As per section 194R, if any person (other than an individual or HUF whose total sales or gross receipts does not exceed ₹1 crore in case of business or ₹50 lakhs in case of profession during the immediately preceding previous year) provides any benefit or perquisite to a resident arising from his business or profession and the total value of such benefits exceeds ₹20,000 in a financial year, then such person is required to deduct tax at source @10% of the total value of the benefit or perquisite. Where the benefit or perquisite is in kind, the person has to ensure before releasing such benefit or perquisite that the tax required to be deducted has been paid in respect of such benefit or perquisite.

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Section 194R - TDS on Benefits or Perquisites from Business/Profession

Worked example

⚠️ Common exam mistakes